Russia pilots new system for tracing crypto-to-fiat links

Russia’s central bank and Rosfinmonitoring pilot a new system to trace connections between crypto transactions and fiat operations.

The Bank of Russia alongside Rosfinmonitoring, the country’s main body for financial intelligence, is working on a platform to detect connections between fiat operations and crypto transactions amid efforts to evaluate the size of the local crypto market.

According to a report from RBC, Ilya Bushmelev, director of project portfolio management at “Innotech,” speaking at a forum organized by Rosfinmonitoring revealed that the platform is currently undergoing pilot testing by five lenders without naming them though.

“Based on the results of the pilot, a basic understanding of the necessary actions and tools for financial lenders in terms of conducting crypto-compliance should be formed.” Ilya Bushmelev

As per Bushmelev, the pilot, scheduled until the end of May, may be extended based on outcomes. The objective is to establish a foundational understanding of necessary actions and tools for financial institutions concerning crypto compliance, including the “know-your-crypto-client” and “know-your-crypto-transaction” procedures. As of press time, it’s unclear whether the pilot provided positive insights on the matter.

The latest initiative reflects Russia’s ongoing efforts to navigate the complexities of the crypto landscape. In October 2023, Russian lawmaker Anton Tkachev revealed that a Russian bank had initiated tracking of its customers’ crypto activities as part of the government’s push to establish regulatory frameworks for state corporations’ involvement in the sector. However, no public announcements regarding the outcomes of that pilot have been issued thus far.

In the meantime, authorities in the U.S. and U.K. are scrutinizing crypto transactions for potential ties to Russia, suggesting that operations exceeding $20 billion may have flowed through the sanctioned Russian crypto exchange Garantex. It remains unclear whether Russia’s central bank and Rosfinmonitoring are specifically targeting transactions associated with Garantex or aiming to identify all crypto activity within the traditional finance sector.